2025 Mileage Rates & Other Vehicle-Related Updates from IRS

If you have employees who drive personal vehicles for work or employer-provided vehicles, check out these IRS mileage and other transportation updates for 2025.

First, IRS said in a recent notice that the business standard mileage rate for 2025 is 70 cents per mile.

That’s a 3-cent increase over the 2024 mileage rate of 67 cents per mile.

The standard mileage rate has been steadily climbing in recent years:

• 58.5 cents per mile — first half of 2022
• 62.5 cents per mile — second half of 2022
• 65.5 cents per mile — 2023
• 67 cents per mile — 2024, and
• 70 cents per mile — 2025

Year-end reminder: If you’re relying on the business standard mileage rate, use the rate in effect when the employee was on the road, not when the expense report submitted.

In its December 19, 2024, notice, IRS also released the portion of the business standard mileage rate treated as depreciation. That’ll be 33 cents per mile, up from 30 cents per mile.

Additional Mileage Rates

In its year-end notice, the IRS also announced that two other rates would remain unchanged. They’re for travel related to:

• receiving medical care, and
• moving (due to the Tax Cuts and Jobs Act of 2017, this is for qualified active-duty members of the Armed Forces only until 2026).

For 2025, those standard mileage rates will hold steady at 21 cents per mile.

As usual, the rate for miles driven in service to charitable organizations will remain 14 cents per mile. This rate is set by statute.

Next, in 2025 when computing the allowance under a fixed and variable rate (FAVR) plan, the standard automobile cost can’t exceed $61,200. That’s a decrease, compared with the 2024 amount of $62,000.

The amount is important for any employers that use a FAVR plan to reimburse employees for driving their personal vehicles for business.

The FMV of Vehicles

Notice 2025-05 includes updates that apply to employers using the vehicle cents-per-mile valuation rule or the fleet-average valuation rule to calculate the cost of personal use of an employer-provided vehicle.

Specifically, IRS changed the maximum fair market value (FMV) info needed for those valuation methods. The maximum FMV of vehicles on the date they’re first made available to employees is decreasing from $62,000 in 2024 to $61,200 in 2025.

If the FMV of such vehicles exceeds that amount, you’ll need to use another valuation method to make sure you’re correctly withholding any income and employment taxes.

Providing More in Transportation Benefits

In an earlier announcement, Revenue Procedure 2024-40, IRS released new numbers for employers that make transportation benefits available to employees.

IRS said that in 2025, you can exclude up to $325 per month from an employee’s income if you provide:

• rides in a commuter highway vehicle between that person’s home and workplace
• transit passes, and/or
• qualified parking.

That’s up from $315 per month in 2024.

Of course, it’s never “cruise-control mode” when it comes to fringe benefits.

For example, if you offer payments for rides in a commuter highway vehicle, double-check whether at least 80% of the vehicle’s mileage is for transporting employees back and forth between their homes and workplaces. Another requirement, based on your reasonable expectations, is that employees should occupy at least half of the vehicle’s seats (but don’t count the driver).

Also, consider how qualified transportation fringe benefits coordinate with other fringe benefits. For example, the IRS says a working condition fringe benefit and a de minimis fringe benefit can’t include a qualified transportation fringe benefit.

However, there may be certain exceptions, such as if you’re providing a fringe benefit to a person other than an employee.